It keeps interest rates lower than they otherwise would be and frees savings to finance increases in the capital stock, thereby boosting productivity and real incomes.
We may be in a rapidly evolving international financial system with all the bells and whistles of the so-called new economy. But the old-economy rules of prudence are as formidable as ever. We violate them at our own peril.
The only effective regulation lies in the propensity of customers to choose alternatives, of investors to move their funds elsewhere and of labour to acquire technical skills’.
